New 55% Off on All Courses - Enroll Now! Click Here

    Question

     In the basic Solow model of growth

    A An increase in the savings rate raises the steady-state growth rate Correct Answer Incorrect Answer
    B An increase in the growth rate of population lowers the steady-state growth rate Correct Answer Incorrect Answer
    C An increase in the growth rate of population has no impact on the steady-state growth rate Correct Answer Incorrect Answer
    D An increase in the savings rate has no impact on the steady-state growth rate Correct Answer Incorrect Answer
    E None Correct Answer Incorrect Answer

    Solution

    A higher saving rate does result in a higher steady-state capital stock and a higher level of output. The shift from a lower to a higher steady-state level of output causes a temporary increase in the growth rate.

    Practice Next